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VAT and food retail: What’s ‘hot’ and what’s not?

When it comes to VAT, it is always important to get the classification right for the supply of goods or services. Crossing the boundaries separating standard and zero-rated items in food retailing can lead to problems. The outcome of a recent tribunal hinged on the question of whether takeaway food supplied by a business was ‘hot’ – or not.

The question of whether takeaway food was ‘hot’ was crucial to the outcome of the VAT tribunal

Pegasus (Manchester) Ltd sold African and Caribbean dishes, such as rice, wraps and curries from a market takeaway outlet. The owners claimed that the food was not supplied hot and, as such, should, for VAT purposes be zero rated. In HMRC’s view, the food was hot and should be standard rated for VAT. A sum of more than £110,000 depended on just one word: ‘hot’.

In VAT legislation, ‘hot food’ means food which is hot when provided to the customer and

has been heated for the purposes of enabling it to be consumed hot;

has been heated to order;

has been kept hot after being heated;

is provided to the customer in heat-retentive packaging;

is advertised or marketed in a way that indicates it is supplied hot.

For food to be classed as ‘hot’ it is defined as being above ‘ambient room temperature’. The phrase ‘kept hot’ has a similarly precise definition. In cases where food is ‘kept hot’ for health and safety reasons, or a purpose other than to enable the consumer to eat it hot, it may be possible for the sale not to be standard rated.

VAT tribual result

During the tribunal, much attention was given to what this all meant in the specific circumstances applying here.

During preparation, Pegasus first cooked the food to 99-100°C, then cooled it to 19-20°C. It was then kept at ambient air temperature and, finally, stored in a Bain-marie. Ambient air temperature in the market was 28-30°C; the Bain-marie maintained a constant heat of 56°C.

The judge’s decision took into account, that whilst the food met the ambient temperature after cooling, later placing it in a Bain-marie meant as ‘a matter of basic physics’, that it had been heated. The food retailer lost the case.

VAT advice

VAT can often be complex, but regularly reviewing your procedures can help keep your business on the right side of the rules. Whether you are a food retailer or perhaps looking to expand into new areas, or your business is approaching the VAT threshold, we can advise on VAT and the implications for your business.

For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.